At present, in order to accelerate national economic diversification and promote national industrialization, African countries have formulated industrial development plans. based on Deloitte's "African Automotive Industry In-depth Analysis Report", we analyze the development of the automotive industry in Kenya and Ethiopia.
1. Overview of the overall development of the African automobile industry
The level of the African auto market is relatively low. In 2014, the number of registered cars in Africa was only 42.5 million, or 44 vehicles per 1,000 people, which is far below the global average of 180 vehicles per 1,000 people. In 2015, about 15,500 vehicles entered the African market, 80% of which were sold to South Africa, Egypt, Algeria, and Morocco, which have rapidly developed African countries in the automotive industry.
Due to less disposable income and higher cost of new cars, imported second-hand cars have occupied the main markets in Africa. The main source countries are the United States, Europe and Japan. Take Kenya, Ethiopia and Nigeria as examples, 80% of their new vehicles are used cars. In 2014, the value of imported auto products in Africa was four times its export value, while the export value of South African auto products accounted for 75% of the total value of Africa.
As the automobile industry is an important industry that promotes domestic industrialization, promotes economic diversification, provides employment, and increases foreign exchange income, African governments are actively seeking to accelerate the development of their own automobile industry.
2. Comparison of the current situation of the automotive industry in Kenya and Ethiopia
Kenya is the largest economy in East Africa and plays an important role in East Africa. Kenya's automobile assembly industry has a long history of development, coupled with the rapidly rising middle class, rapidly improving business environment, and regional market access system and other favorable factors, it has a tendency to develop into a regional automobile industry center.
Ethiopia was the fastest growing country in Africa in 2015, with the second largest population in Africa. Driven by the industrialization process of state-owned enterprises and the government, its automobile industry is expected to replicate the successful experience of China's development in the 1980s.
The auto industry in Kenya and Ethiopia is fiercely competitive. The Ethiopian government has issued a number of encouraging policies, implementing tax reduction or zero-tariff policies for some types of vehicles, and providing tax reduction and exemption policies for manufacturing investors, attracting a large number of investment from China Investment, BYD, Fawer, Geely and other automobile companies .
The Kenyan government has also formulated a series of measures to encourage the development of the automobile and parts industry, but in order to increase tax revenue, the government began to impose a concession tax on imported used cars in 2015. At the same time, to encourage the development of domestic auto parts production, a 2% concession tax was imposed on imported auto parts that can be produced locally, resulting in a 35% decline in output in the first quarter of 2016.
3. Prospect analysis of the automobile industry in Kenya and Ethiopia
After the Ethiopian government formulated its industrial development route, it adopted practical and feasible incentive policies to strengthen the manufacturing industry’s pace of attracting foreign investment, with clear goals and effective policies. Although the current market share is limited, it will become a strong competitor in the East African automotive industry.
Although the Kenyan government has issued an industrial development plan, the government's supporting policies are not obvious. Some policies have hindered industrial development. The overall manufacturing industry is showing a downward trend and the prospects are uncertain.
The African Trade Research Center analyzed that in order to promote national industrialization, promote economic diversification, provide employment, and increase foreign exchange, African governments are actively seeking to accelerate the development of their own automobile industries. At present, South Africa, Egypt, Algeria and Morocco are among the fastest-growing countries in Africa's auto industry. As the two largest economies in East Africa, Kenya and Ethiopia are also actively developing the auto industry, but in comparison, Ethiopia is more likely to become the leader of the East African auto industry.
